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Minus for supplies? The following is an excerpt from a telephone conversation between Ben Simpson, president of Main Street Co., and Tami Lundgren, owner of Reliable Employment Co.: Ben: Tami, you're going to have to do a better job of finding me a new computer programmer. That last guy was great at programming, but he didn't have any common sense. Tami : What do you mean? The guy had a master's degree with straight A's. Ben : Yes, well, last month he developed a new financial reporting system. He said we could do away with manually preparing an end-of-period spreadsheet and financial statements. The computer would automatically generate our financial statements with "a push of a button." Tami: So what’s the big deal? Sounds to me like it would save you time and effort. Ren: Right! The balance sheet showed a minus for supplies! Tami: Minus supplies? How can that be? Ben: That's what I asked. Tami: So, what did he say? Ben: Well, after he checked the program, he said that it must be right. The minuses were greater than the pluses. . . . Tami: Didn't he know that Supplies can't have a credit balance—it must have a debit balance? Ben: He asked me what a debit and credit were. Tami: I see your point. 1. Comment on (a) the desirability of computerizing Main Street Co.’s financial reporting system, (b) the elimination of the end-of-period spreadsheet in a computerized accounting system, and (c) the computer programmer's lack of accounting knowledge. 2. Explain to the programmer why Supplies could not have a credit balance.
Financial And Managerial Accounting
Solutions
Financial And Managerial Accounting
Minus for supplies?
The following is an excerpt from a telephone conversation between Ben Simpson, president of Main Street Co., and Tami Lundgren, owner of Reliable Employment Co.:
Ben: Tami, you're going to have to do a better job of finding me a new computer programmer. That last guy was great at programming, but he didn't have any common sense.
Tami: What do you mean? The guy had a master's degree with straight A's.
Ben: Yes, well, last month he developed a new financial reporting system. He said we could do away with manually preparing an end-of-period spreadsheet and financial statements. The computer would automatically generate our financial statements with "a push of a button."
Tami: So what’s the big deal? Sounds to me like it would save you time and effort.
Ren: Right! The balance sheet showed a minus for supplies!
Tami: Minus supplies? How can that be?
Ben: That's what I asked.
Tami: So, what did he say?
Ben: Well, after he checked the program, he said that it must be right. The minuses were greater than the pluses. . . .
Tami: Didn't he know that Supplies can't have a credit balance—it must have a debit balance?
Ben: He asked me what a debit and credit were.
Tami: I see your point.
- 1. Comment on (a) the desirability of computerizing Main Street Co.’s financial reporting system, (b) the elimination of the end-of-period spreadsheet in a computerized accounting system, and (c) the computer programmer's lack of accounting knowledge.
- 2. Explain to the programmer why Supplies could not have a credit balance.
1. (a)
Comment on the desirability of computerizing Company MS’s financial reporting system.
Explanation of Solution
Financial statements: Financial statements are condensed summary of transactions communicated in the form of reports for the purpose of decision making. Following are the list of four financial statements:
- • Balance Sheet
- • Income statement
- • Statement of owners’ equity
- • Statement of cash flows
Spreadsheet: A spreadsheet is a worksheet. It is used while preparing a financial statement. It is a type of form having multiple columns and it is used in the adjustment process...
1. (b)
Comment on the elimination of the end-of-period spreadsheet in a computerized accounting system.
1. (c)
Comment on the computer programmer’s lack of accounting knowledge.
2.
Explain the reason behind the supplies could not have a credit balance to the programmer.
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